Tracking spending is the best thing you can do for your finances

Whether you are trying to pay off debt, save an emergency fund, or invest for retirement – knowing how much money is coming in and how much is going out is absolutely necessary. Tracking your spending is the best thing you can do for your finances.

Even if you do nothing else right now, do this one thing. It is a powerful first step. For my family, nothing helped our finances more than tracking our spending.

I was curious what methods my fellow personal finance bloggers use and what happened when they started tracking. So, I asked the question in the Rockstar forums. Who better to learn from? I mean, we’re talking total money nerds here. These are people that have taken financial control and have been successful. I think there’s a lot to learn from those who have went before us. Here’s what they had to say and what methods they use.

What happened when you started tracking your spending?

“We knew EXACTLY what we were spending and where and could then make decisions based on that information. Without that, we would be flying blind with our spending.” – ESI Money

“It was the first time I was able to actually see exactly where I was financially… which, of course, made me want to cry. I was in debt horribly at the time and didn’t even realize it. But I used its Debt Reduction Planner [Quicken] and was able to get out of debt within a few years and build things up tremendously since then”. – Jim, Route to Retire

“Once I started tracking my spending I was able to cut back on a lot. I made a game out of it to try to beat the month before with everything…including my electric…Anywho, knowing your income and knowing your spending are the key tools to knowing your savings rate which is a huge factor in FI and my main motivator.” – Miss Mazuma

“The first time my wife and I tracked our spending was life changing. When I saw where our money was going I was shocked at first. I couldn’t believe how much waste there was. But then I got excited when I realized how easy it was going to be to cut back and start saving hundreds each month.” Derek, How Do I Money

“It helped me figure out what it costs to be me…Understanding how much living my life costs allowed me to calculate a tangible passive income figure I needed to earn in order to cover those outgoings and achieve FI. – Cantankerous Life

“When we first started tracking, it really helped us to pin down what we were spending on food, health (a big expense for us), and where our cash was going. These days the tracking helps us see where we stand on our budget, as well as helps us adjust individual categories when needed.” – Gary, Super Saving Tips

How they track spending

What do all those awesome personal finance fanatics use to track their spending? As I was sorting through the responses, I noticed some trends. Below is a list of the tracking tools they use.

Mint

Mint’s initial set-up is easy, though setting your budgeting categories and goals takes a few hours in the beginning. Mint allows you to link all of your accounts easily and automatically syncs your latest transactions, so there is little manual input. Though you do have to deal with banner ads, Mint is also totally free.* Here’s the feedback on Mint:

Chris Istace likes Mint. He says, “Mint works for me because I don’t need to get ultra complicated. I want a clear snapshot of what is happening in each of my accounts every day. I want a clear snapshot of what my monthly budget goals look like…I use Mint because it is simple and for the most part does all the work for me.” Chris would rather be outdoors than tracking his expenses and this program gives him the time to do that!

The Grounded Engineer uses Mint and gives the advice, “To use it effectively you need to actively check in on your budget WEEKLY!”. (More on how he tracks here.)

Wealth Rehab uses a combination of Mint and Google Docs (next up) and says, the “majority of my spending is done through cards, so I am able to track transactions.”

Excel and Google Sheets

Spreadsheets, whether Google Sheets or Excel, are another popular tracking method.

Heartland Hustle uses Excel because the “work of manually updating a spreadsheet on the regular keeps me better in tune with how my money is being spent and staying on top of when bills are due”. And the best thing about it is, they “update it over coffee every weekend together”!

Dads Dollars and Debts got frustrated with Mint and moved to using an Excel spreadsheet and is simply tracking everything coming in and going out (instead of detailed categories). He says, “It has improved our quality of life not focusing on every dollar”.

Chief Mom Officer has used Excel for about 15 years and says, “Excel and I are best buddies”. She’s tried all the online tools out there, but still prefers Excel. In her words, “I’ve found it makes me more deliberate and conscious with my expenses, and it only takes a few minutes every morning to record what’s gone out/come in”. She finds categorizing and splitting costs easier, and uses pivot tables for more control over what she tracks. As she says, “Why yes I am a finance nerd, why do you ask?” 🙂

Miss Mazuma tracks everything (assets, spending, and income) on a single Google Sheet. In her words, “Google Doc is free and can be accessed from any computer. I LOVE it!!!” For more on how she does it, check out this post.

Military Fire is also “a diehard Excel fan”. He likes the flexibility and says, “Nothing else lets me break out both my past expenditures AND lets me plan debt paydown or investing.” You can see exactly how they track here.

Matt Miller from Optimize Your Retirement uses Google Docs/Sheets and says, “It’s a huge time saver when I input my taxes into TurboTax to essentially have a ledger I can copy and paste”.

Quicken

ESI Money has used Quicken for 22 years and uses a spreadsheet for their budget. It’s stood the test of time for him!

Route to Retire has tried out other popular online financial tools, but has used Quicken for 18 years and still thinks it’s the best tool. Jim likes the ability to view pending transactions and says, “Quicken lets me see to the penny exactly where I’m at with everything”.

Gary from Super Saving Tips chooses to manually enter transactions into Quicken. He says, “This helps me stay connected to what we’re spending and check against errors”. He and his wife use the Quicken data to create a budget report in Excel each month to review.

Moneydance

If you’ve never heard of the Moneydance app, here is the description from their site:

“Moneydance is easy to use personal finance software that is loaded with all the features you need: online banking and bill payment, account management, budgeting and investment tracking.

Tiller

Derek from How Do I Money started with pen and paper, moved to a Google spreadsheet, and now uses Tiller and loves it. Check out the entire video series he created on how to get started with Tiller, as well as videos on how to set up a budget, debt snowball, savings goals and track net worth.

You Need a Budget (YNAB)

YNAB is a great system for managing and tracking your money – it’s not a strict budget. I have used it myself and you can check out my review here. I’ve heard from a number of people that the YNAB system helped them completely gain control over their spending, budget, and finances.

Big Law Investor says, “YNAB has been a game changer when it comes to (1) thinking about money and (2) dialing back expenses”. If you want to read more about YNAB and his experience, check out this post.

Miss Bonnie MD says using YNAB has been “LIFE CHANGING” for her and she “can’t imagine life without it”.

Matt from Finance Yo Self says of YNAB, “…it seems tedious to enter in every transaction as you make it but having a good smartphone app means it takes 20 seconds. Most important I think is that it’s “real time data” – I can see exactly how much I’ve spent on groceries halfway through the month and either adjust my budget or shopping smarter. At the end of the month everything is already categorized and most of the work is done, it’s just there for me to review.”

Thrifty

Chris over at Keep Thrifty used to track using spreadsheets, but didn’t like that “you can’t as easily update them on your phone”. So, he created Thrifty – an app for “tracking income, taxes and expenses”. He uses it every day and Thrifty is FREE for anyone to use. Also, check out his comprehensive post on his family’s budgeting process.

Groovy Expense Tracker

The Groovy Expense Tracker was created for the Groovy’s by the Groovy’s (over at Freedom is Groovy). And it’s free for you to download too! They recently retired (early!) and have been using this method successfully for three years now. As Mr. Groovy says, “track every penny – and also make sure to capture all yearly expenses like insurance” – this tool will help you do just that.

Online Banking

Not all online banking is created equal – maybe yours has a tracking feature too! EEMusings says, “my online banking is pretty awesome – it has built in spend tracking features, so a couple times a week I go in, review, and categorise all transactions”.

Creative Alternative Methods for Tracking Expenses

Below are two great examples of different ways to track, unrelated to specific online tools. Maybe one of them will work for you too.

I have them write out a list of expenses for both #1 and #2. I then show them that making enough residual income to just meet their basic needs is actually pretty easy to obtain, and at that point, you are technically free to pursue work on your terms. The extra money from working can then go to increase investing and provide financial support for the activities in #2, until residual income meets and exceeds the spending in #2. Then I tell them, that if they really want to pursue the fancy stuff (if it truly makes them happy), then they can do it at that time. The key is that they need to look at finances from a perspective of time freedom first, building riches later. This way they are not overwhelmed to just start the process.”

NWOutlier doesn’t like to track and budget for individual items, so he tracks spending as a whole:

“I track total spending, total job income and I overlap that with where I currently stand with a 4% withdrawal rate.”

“So what this looks like month over month is the blue line is income, the red line is spending; we don’t want those to cross or intersect, but sometimes they do. The green line is the 4% withdrawal rate of my current portfolio (I use 4% as a guideline, not a rule – I have other goals to buffer beyond that).

When the green line (4% withdraw) crosses the red line (expenses) – then I’ve basically covered my living expense and I am free to leave a full time job and look for more interesting contracts or work I will enjoy or take a year off or whatever I chose. The longer I can keep the green line over top of the red, the more secure or independent I am.

So, in short – I take a different look at it. The above is a 3 year snapshot – the spikes in income (blue) are bonuses, the spikes in spending(red) are typically house repairs or upgrades (floors, roof, heater, etc…) so, I couple tracking spending with income and something that tells me how close I am to independence.

If I focus purely on spending – I get really stressed out. I have to keep my minions (dollars) working for me.

I saw this technique from someone on the web a few years back and I started to do the same – my spreadsheet has much more detail, but I found it fun to see that green line get closer to the red… can’t wait for it to cross it!” 🙂

Whew! There it is friends! One of these methods is sure to work for you, but if not, get creative and develop your own method. The most important thing is to get started!

Reader Interactions

Comments

We track with Excel, and it works well for us. It was an amazing difference between what we thought we spent (especially on food) and what we actually spent, and it’s been a great tool for cutting back on impulse buys. Plus, my husband and I have to communicate a lot more about our spending than we did before we tracked.

The only problem comes at Christmas when we’re trying to surprise each other. It’s not usually a ton of money involved, and we’ve budgeted for it, but since we track where and when we spend, sometimes we let out more info than we wanted to reveal.

I’ve been absent from the forums lately and need to stop in this week. I miss them. It’s a great place to connect!

Excel seems to be a popular method. I think it’s pretty common for people to think they know what they spend, but they are shocked when the truth reveals itself. That’s why I’ve continued to do it after so many years. It keeps everything in check.

I hear ya on the gifts. I process receipts once a week, so if my husband did get me something (which is rare – we don’t usually buy each other gifts), I usually know before I get it.

Month to month I’m only watching total spend, not categories. I check categories as part of routines if I notice an opportunity to reduce like yearly shopping for insurance or cell coverage. I realize getting started you need more detail but I’ve found once the ball is rolling it’s more of keeping spending at the same levels.

Tracking total spend works for many who have already been through the process of tracking down to the penny in each category. Whatever works best is what you should do! I still like to do it for two reasons: 1) I’m a weirdo and I enjoy it and 2) I can adjust each week if we are trending to high in a certain category.

We’ve used an Excel spreadsheet for tracking since we started tracking just over four years ago. I love it. Like others said, it makes it really simple to spot waste. You then have the information that gives you the power to change your financial life. It’s wonderful!

I’m using a new app called…I think it’s just called Expense Tracker. I love PC and they do a good job overall, but there are a lot of little nuances I can’t break down in PC like I can if I do it manually, for instance, I get cash back when I go to the grocery store for laundry money, so I can get small bills back (as apposed to the ATM). Well PC can’t see that so all that gets thrown in one lump sum. Now I can break it out and see exactly what I spent on groceries, which is not nearly as much as I thought it was. The whole experience is eye-opening, but you have to be disciplined about entering EVERYTHING!

I like PC for an overall snapshot of our finances. You can spot trends and identify problem areas. But, like you, I like to do it manually and break it down into more specific categories. Being disciplined about entering everything is really important – it’s easy to “skip” and expense or two now and then to try to make yourself feel better.

I agree that tracking is so important–more important than budgeting because what use is a budget if you don’t follow it? We’ve used Mint for years and just started trying Personal Capital. Both are great tools and much easier than tracking on your own, though you may have to tweak things to get a more accurate picture.

Agreed, Kalie! We don’t even really have a budget because I track diligently and adjust as needed. You mention two great tools – you can tweak the categories in PC (and Mint too) to customize it for your needs. And then it all magically happens automatically.

Thank you so much for including me!! I completely agree that tracking is the number one thing you can do to take charge of your fianances. I’m a number nerd who loves to look at how others are tracking so this post is fascinating to me!! Everyone has their own way and it’s such a delight to be able to take a peek in. It looks like I have a lot of peeking to do here!

What a great post, Amanda. Thanks for including me! It’s awesome to see how different people use different methods to achieve the same goal. There are so many options out there that sometimes it can be a little paralyzing to choose, but like you wrote, the important thing is to just start, even if it’s pencil and paper.

Thanks so much, Gary! 🙂 I started with pencil and paper in a binder (and I still have a binder for other finance-related tasks, such as tracking bills). And, though I have transitioned to a spreadsheet for tracking spending, I love the act of manually recording it.

Great post! I use Mint and google docs (excel). I will be paying off my car, sending my child on an international trip and paying off SL interest this year. RIce and beans, maybe. But tracking and staying accountable…wow, I am surprised what I will be able to this year.

Thank you! Another vote for Mint and Google! I truly believe we would never be able to pull off what we have on one income without tracking and keeping ourselves accountable. I love that you are able to accomplish all of those great things this year. Congrats! 🙂

I need to make some time to spend at the forums. I created an account the day they went live and have never actually been there. Life should be less busy after the next week or two, so I’ll have to make a point of getting over there.

Thanks for the round-up! A lot of really interesting thoughts in there!

Wow what a huge variety of ways to track your spending! I have been using an Excel spreadsheet for over five years now and prior to Tiller it was a really manual process. I think anyone who doesn’t use Tiller is really missing out and I’d be shocked if they didn’t double their users every year for the next 5 years or so.

Thank you for including me. You did an awesome job gathering all this useful information in one post. It’s interesting how many find more value in tracking than in budgeting. Dave Ramsey would say you need to tell your money where to go but I get more from seeing where mine went!

Great list of resources – I’m totally with you on the power of tracking. It’s been a big part of us cutting our monthly food expenses by hundreds of dollars a month.

Thank you SO much for including Thrifty in your list. I don’t have the huge team of developers that the guys at Mint, PC, Quicken, and YNAB have but at least I’m a bit more accessible for feature requests 🙂

We’ve been using Mint for years. It took a while to get past the fact that you need to provide them with all of your financial account information. We’ve also tried Personal Capital, but for some reason I still prefer Mint.

Oh my gosh, Amanda! This is an amazing resource you’ve created. You are right to say the tracking is the single most important thing people can do to turn their finances around. The question is how to get into the habit of actually doing it, and you’ve provided so many different ways of going about it. I’m with Heartland Hustle: “the “work of manually updating a spreadsheet on the regular keeps me better in tune with how my money is being spent” Something about the effort required makes the spreadsheet most effective for us too.

Thanks so much, Ruth! 🙂 Organizing it was no small task, but hopefully it’s user friendly. And, I’m the same exact way – I actually enjoy manually updating my custom made-for-me spreadsheet. It forces me to pay more attention and adjust as needed.